LB Holdings Intermediate 2 Limited (in administration)

This site provides information regarding the progress of the administration of LB Holdings Intermediate 2 Limited (“LBHI2”).

LBHI2 entered administration on 14 January 2009. The current Joint Administrators are Edward John Macnamara, Gillian Eleanor Bruce and David James Kelly. The Joint Administrators manage LBHI2' s affairs, business and property as agents without personal liability. All the Joint Administrators (the “Administrators”) are licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales.

The Administrators are not currently in a position to give an estimate of the timing or quantum of any dividend to creditors of LBHI2.

Creditors are updated on the progress of the administration of LBHI2 through the Administrators’ six monthly progress reports and via this website. We encourage creditors who believe they may be entitled to claim against LBHI2 to continue to check this website for relevant information.

Information

Timeline

In 2009, LB Holdings Intermediate 2 Limited (LBHI2) entered administration on 14 January, following the insolvency of its parent company Lehman Brothers Holdings Inc (LBHI).
The main assets of LBHI2 were intercompany debtors and tax losses, and its main liabilities were to intercompany creditors, especially any shortfall to its subsidiary Lehman Brothers International (Europe) (LBIE).

In 2010, the Pensions Regulator listed LBHI2 as a target for a Financial Support Direction (FSD) in relation to the Lehman Brothers Pension Scheme, but the Determinations Panel decided not to issue an FSD against LBHI2 in September 2010.
This decision was contested by the Scheme Trustees, who referred the matter to the Upper Tribunal, creating a potential liability for LBHI2.

In 2011, LBHI2 entered into a settlement agreement with Lehman Brothers Holdings Inc (LBHI), agreeing its claim at $2.7 million for direct claims and $302 million for guarantee claims, and receiving a dividend of $13.8 million in April 2012.
LBHI2 also realised £4.8 million from the sale of tax losses and expected a further £1.7 million from additional sales.

In 2012, the Upper Tribunal declined to strike out the Trustees' referral, meaning LBHI2 was still at risk of an FSD, and the decision was appealed to the Court of Appeal.
LBHI2 received another dividend of $9.3 million from LBHI in October 2012, and recovered £2.7 million from the sale of tax losses, bringing the total receipts from tax losses to £9 million

In 2013, the Court of Appeal rejected the appeal against the Upper Tribunal's decision, and a hearing was listed to begin on 29 April 2013 to determine whether LBHI2 should be subject to an FSD.
The administration period was extended to 30 November 2015 by a court order.

In 2014, LBHI2 entered into a Joint Venture with Elliott Management Corporation and King Street Capital Management, L.P., resulting in LBHI2 receiving approximately £650 million for its economic interests in claims against LBIE. LBHI2 also received a dividend of $13.89 million from LBHI, equivalent to approximately £8.48 million.
The same year, the Administrators applied to the High Court for directions on the potential liability of LBHI2 and LBL as shareholders of LBIE, and the priority of LBHI2's subordinated debt claim against LBIE (the "Waterfall" application).

In 2015, the Administrators also applied to the High Court for further directions on various issues arising from the calculation of interest and currency conversion claims against LBIE (the "Waterfall II" application).
The application was split into three parts, and the judgments for Parts A and B were handed down in 2015, while the judgement for Part C was handed down in 2016.

In 2016, the Administrators made a third application to the High Court for directions on the extent of the liability of LBHI2 and LBL as shareholders of LBIE under section 74 of the Insolvency Act 1986, and the ability of LBIE to prove in the insolvencies of its shareholders (the "Waterfall III" application).
The application was also split into two parts, and the judgement for Part A was handed down in 2017, while Part B was scheduled for trial in September 2017.

In 2017, the Supreme Court gave its judgement on the Waterfall application, which resolved some of the key issues affecting LBHI2's claims against LBIE, such as the ranking of the subordinated debt and the existence of currency conversion claims. 11 21 Following the judgement, the Administrators obtained permission from the Court to make a first interim distribution to LBHI2's unsecured creditors of 100p in the pound plus a share of statutory interest.
The same year, the Administrators also entered into lengthy and complex negotiations with LBIE, LBL, LBH and LBEL to reach a settlement of the Waterfall III application and expedite the payment of distributions to creditors. The settlement was completed in September 2017 and became effective on 6 September 2017.

In 2018, the Court of Appeal gave its judgement on the Waterfall II application, which upheld the High Court's decisions on most of the issues, except for the interpretation of the term "relevant payee" in relation to interest claims. 5 24 25 26 The Court of Appeal also dismissed the appeals of the Waterfall III Part A judgement, which confirmed that LBHI2 and LBL were liable to contribute to LBIE's assets under section 74 of the Insolvency Act 1986.
The same year, the Administrators made a second interim distribution to LBHI2's unsecured creditors of 100p in the pound plus a share of statutory interest, following the receipt of substantial dividends from LBIE and LBHI. The Administrators also applied to the High Court for directions on the priority of the subordinated debt claims against LBIE, which remained unresolved after the Waterfall litigation (the "Priority Application").

In 2019, the Company paid a second distribution of £160m to LBH, its senior subordinated creditor, with the consent of SLP3, its junior subordinated creditor.
The High Court also heard the Priority Application, a dispute between LBH and SLP3 over the ranking of their claims, and delivered its judgement in favour of LBH in July 2019.

In 2020, the Company paid a third distribution of £132.4m to LBH, again with SLP3's consent, bringing the total paid to LBH to £337.1m. SLP3 appealed the High Court's decision on the Priority Application to the Court of Appeal, which heard the case in October 2020.
The Company also settled the Clawback Proceedings, a claim by LBHI for the repayment of a loan, for $90m in June 2020.

In 2021, the Court of Appeal delivered its judgement on the Priority Application, upholding the High Court's ruling that LBH's claim ranks before SLP3's claim. SLP3 applied for permission to appeal to the Supreme Court, which was refused in August 2021.
The Company also received a dividend of £32.1m from its preference shares in LBIE, which was paid to Wentworth, its joint venture partner.

In 2022, the Company paid a fourth distribution of £110m to LBH, with SLP3's consent, bringing the total paid to LBH to £447.1m.
The Company also submitted its corporation tax return for the period ending 13 January 2023, which had a deadline of 13 January 2024.
The Company's term of office was extended by the Court to 30 November 2025.

In 2023, the Company paid a fifth distribution of £86m to LBH, with SLP3's consent, bringing the total paid to LBH to £533.1m.
The Company also sold its tax losses for £0.1m and received a dividend of £0.1m from its preference shares in LBIE, which was paid to Wentworth.
The Company's 29th progress report was issued in February 2023.

Contacts

All queries to the Administrators of LBHI2 should be sent to: generalqueries@lbia-eu.com.

_{Edward John Macnamara, Gillian Eleanor Bruce and David James Kelly are are licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. The Joint Administrators are bound by the Insolvency Code of Ethics which can be found at: https://www.gov.uk/government/publications/insolvency-practitioner-code-of-ethics}

^{The Joint Administrators may act as controllers of personal data, as defined by the UK data protection law, depending upon the specific processing activities undertaken. PricewaterhouseCoopers LLP may act as a processor on the instructions of the Joint Administrators. Personal data will be kept secure and processed only for matters relating to the Joint Administrators' appointment. Further details are available in the privacy statement on the PwC.co.uk website or by contacting the Joint Administrators.}